Year-end report 2000

Year-end report 2000 · The process of obtaining EU-certification for Artimplant's first product continues. The build-up of the company's quality control system has been progressing during most of the year and is in operation since December 2000. · Earlier indication from Notified Body regarding a possible EU- certification during the first quarter 2001 has been revised in a fixed schedule, which implies that the certrification audit has been delayed to May 29-31, 2001. The reason given for the delay is Notified Body's burdened work schedule. · Preliminary follow-up results from a pilot study show that treatment with Artimplant's spacer implant leads to significant pain relief already within six months. After securing a patent protection for the spacer implant, these results will be presented at a hand surgery conference in March 2001. · The documentation for an EU-certification of Artimplant's augmentation implant for reconstruction of the anterior crutiate ligament injury (ACL injury) includes clinical and immuno-histological data from a three year follow-up of the pilot study initiated in autumn 1997. These results will be presented in a scientific forum later in 2001. · The first randomized multicenter study is proceeding according to plan. Interim follow-ups show no deviation from expectations or compared to earlier pilot study. · A second project within the collaboration agreement with Mölnlycke Health Care has started and other projects are being planned. · Artmiplant's management has been strengthend through new recruitments of a Quality Control Manager, a Medical Director and an Information Director. · Revenues for the Group during 2000 amounted to SEK 22.4 (20.0m). Operating result amounted to SEK -27.1m (-14.7m). Result after financial items amounted to SEK -20.6m (-14.2m). Earnings per share after taxes amounted to SEK -2.30 (SEK -1.72). The Board of Directors proposes that no dividend be paid for the financial year 2000. Artimplant's result January-December 2000 Net sales for the Group during January-December 2000 amounted to SEK 22.4m (20.0m). Operating result during the period amounted to SEK -27.1m (- 14.7m). Result after financial items amounted to SEK -20.6m (-14.2m). Goodwill relating to the acquisition of GMC amounted to SEK 12.3m at the end of the reporting period and is depreciated over 20 years. The Parent company's net sales of SEK 2.4m refers mainly to proceeds from Mölnlycke Health Care. Higher costs and investments for R&D operations, marketing and production had a negative effect on the operating result. Additional personnel was recruited to all these functions during 2000. Revenues from sales of warrants to personnel and persons tied to the Artimplant Group, as well as higher interest income from share issue proceeds received in April 2000, had a positive effect on financial items. Net sales for the subsidiary Gothenburg Medical Center (GMC) increased during the year by 15 per cent to SEK 21.9m (19.0m), in spite of a cut- back of non-prioritized operations and building reconstruction. Operating result amounted to SEK 0.8m (1.4m). The lower operating result is mainly due to an increase in costs for cultivation of cartilage cells in connection with cartilage replacement procedures. As of the fourth quarter, GMC has forwarded the entire cost increase to invoicing, which has not had a negative effect on the demand for such surgical procedures. Recruitment of one additional orthopedic specialist surgeon is planned for 2001. Operations Artimplant is a biomaterial company focused on unmet medical needs in the field of orthopaedic surgery. The company develops biodegradable implants, in order to recreate an active life. The implants provide injured or worn tissue with temporary relief and support the body's natural healing processes. The company's in-house developed biomaterials are based on a new patented technology that opens new market opportunities within orthopaedic surgery and several other specialist areas where medical needs are significant. The process of obtaining EU-certification for Artimplant's first product continues. An intensive work with the build-up of the quality control system has been in progress during most of 2000 and used large resources from all functions within Artimplant. The quality control system, which is a prerequisite for an EU-certification, is up and running since December 2000. Earlier indication from Notified Body regarding a possible EU- certification during the first quarter 2001 has been revised in a fixed schedule, which implies that the certrification audit has been delayed to May 29-31, 2001. The reason given for the delay is Notified Body's burdened work schedule. The documentation for an EU-certification of Artimplant's augmentation implant for reconstruction of the anterior crutiate ligament injury (ACL injury) includes clinical and immuno-histological data from a three year follow-up of the pilot study initiated in autumn 1997. Furthermore, the documentation includes safety data from the first randomized multicenter study including 200 patients. Artimplant expects to have several products certified during the coming years and has therefore initiated an extensive pre-launch program. This includes mapping of the Nordic region and larger markets in Europe with the purpose of establishing own sales channels over time in countries such as Germany, France, Spain, Italy and Great Britain. Further recruitments have been made within the company's sales and marketing organization, which will include six employees by March 2001. A Sales Director for the Nordic region, two international Product Managers and a Market Communication Manager have recently been recruited. As a support for the scientific documentation and Artimplant's launch strategy of various products, further clinical studies are carried out and planned within and outside the Nordic region. This includes an expansion of the second multicenter study for ACL-injuries initiated during the first half of 2000 in Finland and which later on was expanded into Sweden. The first project of the Mölnlycke Health Care (MHC) cooperation has been completed. The biological evaluation of the new material variations within the wound care area will take place under Mölnlycke's management. Artimplant will parallelly continue biological evaluation of the new materials within other medical application areas. A second project within the collaboration agreement with MHC has been initiated. Artimplant will supply material for biological studies on voluntary healthy subjects. The project is expected to proceed until summer 2001. Further projects are being planned. Anterior Crutiate Ligament (ACL) A ruptured ACL in the knee is one of the most frequent ligament injuries and often leads to lifelong detrimental effects for the injured, and substantial costs to society. Artimplant's first product for certification is an implant for reinforcement during ACL-injury reconstruction. The application refers to reinforcement (augmentation) of tissue taken from the patient (so called autograft). Artimplant has so far intiated three clinical studies for this application: 1. a pilot study initiated in autumn 1997 including 20 patients where a part of the patient's patellar tendon has been reinforced with Artimplant's implant; 2. a first randomized multicenter study including 200 patients initiated in spring 1999, where half of the group was surgically treated with the same technique as in the pilot study and the other half with patellar tendon without reinforcement. This study is designed according to FDA's recommendations regarding long term follow-up of reconstruction of ACL- injuries (minimum 24 months follow-up); 3. a second randomized multicenter study including 100 patients initiated in spring 2000. Half the group is surgically treated with tendon taken from the back side of the patient's thigh (so called hamstring) reinforced with Artimplant's implant and half of the group with hamstring tissue without reinforcement. The operation series is expected to be concluded during the first quarter 2001. The first randomized multicenter study is proceeding according to plan. Interim follow-up shows no deviations from expectations or compared to earlier pilot study. Data from this multicenter study can according to the protocol be used to show clinical stability after a 24 month follow-up. One of the potential advantages with the hamstring method is less complications at the donor site compared to if the patellar tendon is used. In the study, which takes place in Finland and Sweden, 90 patients have so far been treated. The operation series will include a total of 100 patients. The intention is to expand this study in Norway and Denmark during the second half of 2001. Spacer Artimplant is carrying out a hand surgery study on ten patients with osteoarthritis at the base of the thumb. The injury causes increasing pain and limited grasping ability. Osteoarthritis at the base of the thumb is one of the most common forms of arthritis in the hand, especially among older women. The estimated prevalence in the western world is approximately 10 per cent of the popluation above 55 years of age and there are no satisfying treatment alternatives avaliable. The market potential is estimated at more than SEK 5bn. Preliminary follow-up results show that treatment with Artimplant's biodegradable implant (spacer) leads to significant pain relief already within six months. After securing a patent protection for the spacer implant, these results will be presented at a hand surgery conference in March 2001. Planning of a multicenter study with the spacer implant for treatment of thumb-base osteoarthritis is ongoing and inclusion of patients is expected to start during the third quarter 2001. Thumb ligament At an international hand surgery congress during August in Kuopio, Finland, as well as at the Annual General Meeting of the Swedish Society of Medicine in Gothenburg in December, Artimplant presented promising short term follow-up results on a new method for treatment of chronic thumb ligament injuries. All five patients included in a pilot study had after six months regained normal joint stability and grasp strength in the operated joint. Today these patients are normally offered arthodesis as the only remaining treatment alternative. In the pilot study a so called augmentation technique was used, which means that joint tissue from the patient's wrist was reinforced with Artimplant's biodegradable implant. Using the augmentation principle is new within the hand surgery area and created considerable interest at the scientific meetings in Kuopio and Gothenburg. After receiving approval from the ethical committee additional patients have been included in the pilot study. An estimated half a million people in the western world are diagnosed with thumb ligament injury each year. It is one of the most common skiing injuries in the hand. When early diagnosed, the injury is treated surgically shortly after occurrence whereby the ligament is reattached to its original location. However, an improper diagnosis, or reattachment failure, will eventually lead to chronic injury with joint instability, cartilage weardown and arthrosis development. The market potential for Artimplant's biodegradable implant for treatment of chronic thumb ligament injuries is estimated at approximately SEK 500m. Investments and financial position During January-December 2000 investments amounted to SEK 35.5m (23.03m), whereof SEK 29.0m (19.0m) were made in immaterial assets. At the end of the reporting period liquid assets amounted to SEK 137.7m (39.7m). After authorization from an extraordinary General Meeting on March 27, 2000, Artimplant effected a directed issue of 1,000,000 B shares at a price of SEK 143 per share. The main share of the issue was subscribed by international institutions. During April, the company received proceeds amounting to SEK 136m after deduction of issue related costs. Artimplant's ordinary Annual General Meeting on May 3, 2000 approved a warrant program for employees and persons tied to the Artimplant Group. The program includes 512,500 warrants and each warrant entitles to subscription of one B share at a price of SEK 300. The warrants are to be exercised no later than March 30, 2004. If fully exercised the warrant program will provide the company with proceeds of SEK 154m and have a dilutionary effect of 5.5% for the capital and 2.8% for the votes. At the end of the period, 243,400 rights had been subscribed. Personnel During 2000 Artimplant initiated the build-up of the sales and marketing organization. The management team has also been stregthend. In Janaury 2001 Kristina Lindberg became Human Resource Director. Anne Mari Nedevska has been recruited as a new Quality Control Manager. In March 2001 Ingrid Ekenman and Ulf Åkerblom will join Artimplant as Medical Director and Information Director respectively. Ingrid Ekenman leaves her position as Head of Operations at Astrid Lindgrens Childrens Hospital. Ulf Åkerblom has long experience as information and communication strategist with investor relations experience. The number of employees at the end of the reporting period amounted to 60 (48), whereof 32 (32) were employed at GMC. The number of consultants tied to the parent company amounted to 11 (11). Patents As of February 20, 2001, Artimplant has five patents approved in Sweden whereof four are approved in a number of other countries. During 2000 the company got its so called principal patent approved in the US and Europe. During the year another five patents were filed at the Swedish Patent Office (PRV) followed by one additional filing in early 2001. Dividend The Board of Directors proposes that no dividend be paid for the financial year 2000. Other On February 19, 2001 Akbar Seddigh was elected Chairman of the Board of Directors until the next Annual General Meeting. Claes-Göran Fridh leaves the position as Chairman but remains on the Board. For further information, please contact: Anders tel: +46 - 31 - Cedronius, CEO 746 5600 Lars-Erik tel: +46 - 31 - Nygren, CFO 746 5600 ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/02/20/20010220BIT00230/bit0002.doc The full Year-End Report http://www.bit.se/bitonline/2001/02/20/20010220BIT00230/bit0002.pdf The full Year-End Report